© Reuters Google Appen falls 40% after contract ends, analysts remain 'fundamentally bearish'
Appen (APX) stock plunged more than 40% in Australian trading on Monday after Alphabet's (NASDAQ:) Google opted to terminate its inbound services agreement, which accounts for about 30% of Appen's expected 2023 revenue. A contract was signed.
The decision, revealed as part of Google's strategic review, took Appen by surprise and resulted in the company ceasing all work on the projects covered by the contract by March 19th.
Appen expressed disappointment with the unexpected decision, stressing that the company had no prior knowledge of the termination, and that the Google deal accounted for $82.8 million of its $273 million in annual revenue.
Following the news, Morgan Stanley analysts reiterated their Underweight rating on APX, citing concerns such as “low value” of Appen's technology to existing customers and increased competition.
“Today, we received important confirmation of this theory from Google, one of APX's long-standing major customers,” the analysts wrote in a note.
As a result, analysts expect it to have a “significant economic impact on the rest of the APX business.”
“We remain fundamentally bearish,” the team concluded.
